Slower Wage Growth Drags Australian Stocks; Tully Sugar in Focus

Marcus Jacob
18 May, 2011
New York City

The Australian benchmark index gained as the first quarter wages increased 0.8% from the previous quarter and gained 3.8% from a year ago. Graincorp soared 5% on takeover talks and Tully Sugar shareholders approved the change that will facilitate the takeover.

[R]4:30 PM Sydney – The Australian benchmark index gained as the first quarter wages increased 0.8% from the previous quarter and gained 3.8% from a year ago. Graincorp soared 5% on takeover talks and Tully Sugar shareholders approved the change that will facilitate the takeover.[/R]

Australian stocks edged higher and dollar edged lower after the wages data in the first quarter showed weaker than expected increase.

The ASX 200 index increased 9.80 to 4,693.70 and the All Ordinaries index added 12.30 to 4,765.30.

The Australian dollar was nearly unchanged with a negative bias and closed at US$1.056.

Wages and salaries, excluding bonuses increased seasonally adjusted 0.8% in the first three months to March from the previous quarter and rose 3.8% from a year ago.

The Australian Bureau of Statistics said private sector wages increased 0.9% and public sector wages increased 0.8%.

Stock Movers

Banks closed lower after the rating agency Moody’s lowered its views on all four large Australian banks. The rating agency as usual late with their read on the market cited the banks’ reliance on wholesale market for funding its needs.

The Australian banks have relied on the wholesale market for the last ten years and in the recent years the reliance has not increased and in fact Australian banks weathered the U.S. financial crisis in which Moody’s and other ratings agencies played a key role in facilitating mispricing of mortgage securities.

Commonwealth Bank decreased 0.2%, National Australian Bank declined 0.9%, ANZ fell 0.89% and Westpac declined 0.09%.

BHP Billiton fell 0.3% and Rio Tinto decreased 0.2%.

Interest rate sensitive stocks traded higher after the release of weaker than expected wages data. Woolworths increased 12 cents to $27.29 and Wesfarmers increased 40 cents to $33.39.

Telstra increased 2 cents to $3.02 and Austar increased 6% to $1.30 after the regional pay-TV operator entered in a merger talks with the larger rival Foxtel.

Fairfax Media gained 4.5 cent to $1.85 after the media group is looking to sell its radio assets.

Graincorp soared 5% to $8.05 on takeover talks.

Adelaid Brighton, the cement and lime maker increased 1 cent to $3.10 after the company said full-year net is going to match the results in 2010 despite the weakness in the first half.

Tully Sugar at a meeting of shareholders approved the individual holding limit cap of 20% and opened the door for its takeover. Of the 90% shareholders voted in a meeting, 99.4% voted for the change.

Tully Sugar is likely to receive bids from Mackay Sugar, China controlled COFCO ad U.S. traded Bunge.